Mitch Lies/Capital Press
Mallorie’s Dairy business manager Charlie Flanagan, left, and president Rick Mallorie have seen ups and downs in the dairy industry over the years, but nothing to compare to the past two-plus years of depressed milk prices. Mallorie’s Dairy is shutting down this month after 56 years in business.

Mallorie's Dairy cut production to avoid $1 million in federal milk order payments

By MITCH LIES

Capital Press

SILVERTON, Ore. -- Two-plus years of depressed milk prices have brought an end to a long-time Oregon dairy.

After 56 years of producing milk, Mallorie's Dairy of Silverton is closing.

"You can only go behind for so long," Rick Mallorie said. "We haven't figured out how to stop that."

Mallorie said the dairy has sold its 3,000 cows -- including 1,600 milkers -- to a Texas dairy and will shut down by the end of the month.

Business manager Charlie Flanagan said the decision to quit was solely Mallorie's.

"It was our decision to quit," Flanagan said. "It wasn't the decision of the bank, and it's not because we aren't able to pay our bills. It seemed like the smartest thing to do at the present time under the present circumstances."

Mallorie said the decision was "tough and frustrating."

"You keep hoping," he said. "You keep thinking it's going to get better, it's going to get better. Well, the price of milk is going down $1.50 a hundredweight this month."

"There was quite a period of time where we weren't getting enough for the milk to pay for the feed," said Flanagan, who has been with the dairy 28 years. "If you can't even pay for the feed for the cow to eat, that's pretty tough."

"I think this is an indication of what is happening throughout the industry," said Bernie Faber, former Oregon Board of Agriculture chairman and long-time dairyman. "If things don't change, there's going to be more of this."

A USDA ruling in 2005 that prompted the dairy to cut production may have contributed to the dairy's closure. The ruling, which took effect April 1, 2006, required producer-handlers -- dairies that bottle their own milk -- to pay into a national pricing pool when their production exceeded 3 million pounds per month.

Mallorie's at that time sold a third of its cows to an Idaho dairy to get under the cap.

"We either had to be below 3 million pounds of bottled milk a month, or it would have cost us about $1 million a year of payments into the federal milk order," Flanagan said. "That wasn't an option to pay that."

When asked if the ruling contributed to the dairy's closure, Flanagan said: "That's hard to say, but it's not usually a good idea to run any asset at under capacity.

"Before 2006, we had one-third more cows and one-third more milk ran through the plant," Flanagan said. "It was nice and smooth running; the plant was well suited for the volume we were running."

Mallorie's today distributes between 5,000 and 8,000 gallons of milk a week to 16 stores, including 12 Roth's Fresh Market grocery stores in the Willamette Valley. It also sells milk to two other dairies.

The dairy produces feed on about 500 acres, but gets most of its feed from out of the area, Flanagan said.

"The Willamette Valley is not the ideal spot for dairies," Flanagan said. "You have to have a lot of investment in buildings to keep cows out of the mud and rain, and you have to have a lot of investment in manure-handling systems in a very wet climate.

"There's a very good reason why those big dairies in Oregon are located in Boardman (in Eastern Oregon) and not over here," Flanagan said. "Also, they can get all the feed they need right next door."

Mallorie's Dairy was started in 1954 by Rick Mallorie's father, Robert Mallorie. Robert Mallorie moved to Silverton from Ohio after obtaining a degree in veterinary medicine from Ohio State University. He died in 1996.

The dairy grew over the years, Rick Mallorie said, until at its peak in 2005 the dairy was milking 2,100 cows.

Mallorie, who is president of the dairy, said the dairy often faced tough times over the years.

"But we always thought it would get better, and it always would," he said. "But this last time around, it has gone on for years, and that's never happened before."

Mallorie said the hardest part of closing is a concern for his 50 employees.

"We have a lot of employees that have been here close to 20 years," Mallorie said. "It has been a lot of people's lives."

Mallorie said he is unsure what will happen to the facility, including the 30,000-gallon-a-day processing plant.

"There aren't a lot of those around," Flanagan said. "Maybe somebody will want to use it."

The dairy leases most of the cattle barns on the site and the processing plant. The milking and processing equipment has been put on the market, Flanagan said.

The dairy will start shipping cows to Texas on Jan. 17. Five days later, the last of its cows are scheduled to be on the road to Texas and the dairy will cease operations.